
It is not my job to call tops or bottoms and as a trader it has gotten me into precarious situations over the years. It is not my intention to say definitively that the stock market has reached top but a failed breakout and a test of the 9-day MA as seen above are both preliminary signs that an interim top may be close if not established.
After a 13% rally in the last 2 ½ months there is not doubt a compelling argument to be made that at some point we get a correction. Investors willing to gain bearish exposure are advised to scale into bearish trades until the market proves you’re correct. Use the Fibonacci levels as your downside objectives. My favored plays would be bear put spreads or shorting futures while simultaneously selling out of the money puts 1:1.
Those with sizeable stock exposure should also consider implementing some short of hedge against their portfolio as a way to insure on a large decline.
Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.
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